Ronald Zajac, left, and Paul Stewart / Detroit Free Press file photos

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Detroit Free Press Staff Writer

He turned out to be a thief who made a $400,000 salary scamming the system, according to an indictment unsealed Wednesday, disclosing yet more allegations of public corruption in Detroit and lavish lifestyles by individuals who abused the public’s trust.

Among them was a former trustee who — the government says — accepted perks galore from businessmen seeking favors, including a $5,000 casino chip, a Christmas basket stuffed with cash and trips for him and his mistress.

That former trustee is Paul Stewart, who, along with Zajac, was indicted Wednesday on charges of bribery conspiracy. They are the fourth and fifth defendants to be ensnared in the government’s years-long investigation into the Detroit pension funds.

Zajac’s attorney said his client will fight the charges. Stewart could not be reached for comment.

Tom Sheehan, chairman of the General Retirement System, said late Wednesday in a statement: “We are aware of today’s indictment of Ronald Zajac. The board is reviewing the appropriateness of Mr. Zajac continuing to serve as the General Retirement System’s attorney. We will announce that decision at the appropriate time and will have no other comment regarding Mr. Zajac’s indictment.”

Zajac and Stewart were added to the original February 2012 indictment that charged ex-Detroit Treasurer Jeffrey Beasley, a onetime fraternity brother and appointee of former Detroit Mayor Kwame Kilpatrick, with taking bribes and kickbacks in a scheme that cost two pension funds $84 million in losses.

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“Public officials entrusted with billions of dollars in employees’ pension money cannot take bribes and kickbacks to influence their investment decisions,” U.S. Attorney Barbara McQuade said of the latest charges Wednesday.

The government’s latest charges follow a yearlong Free Press investigation of the city’s pension funds in 2009 that revealed lavish travel by trustees and staff, questionable dealings by secretive middlemen and repeated incidents in which the funds’ investment adviser failed to detect potential problems in the backgrounds of several businessmen pushing deals.

According to the 13-count superseding indictment, Stewart accepted thousands of dollars in cash, trips, entertainment and other items of value from people seeking investments from the Police and Fire Retirement System. Among the perks he allegedly accepted:

• A Christmas basket that included an envelope with thousands of dollars in cash.

• $2,500 in cash during a trip to New York City.

• $2,500 in cash during a trip to Florida.

• Travel for him and his mistress: an excursion to the Bahamas and a trip to Naples, Fla..

• A birthday present of $5,000 in cash at a party at the Atheneum Hotel in Detroit.

According to the indictment, Zajac organized the party and solicited and collected the cash from people having business before the boards of the pension funds. Zajac also sought to curry favor with Beasley and Kilpatrick by raising more than $70,000 for the Kilpatrick Civic Fund, the indictment said.

Zajac also forced people with business before the pension funds to spend thousands of dollars to entertain trustees, and once forced one trustee to pay more than $10,000 for limousines for other trustees during a trip to New York City, the indictment said.

Soon after giving Beasley, Stewart and a third trustee thousands of dollars in cash at their birthday parties, the trustees voted to give Zajac a substantial raise, bringing his salary to more than $400,000. That’s far more than Michigan Supreme Court justices, the mayor of Detroit and the U.S. Attorney General each make.

“Since taking office in 2009, restoring trust and integrity to city government has been a top priority and of utmost importance to me personally,” Bing said in a statement. “Detroiters deserve to be represented by those who adhere to the highest ethical standards, and when the public trust is betrayed, justice must prevail.”

Zajac’s attorney, Christopher Andreoff, told the Free Press on Wednesday that the indictment was unexpected.
“The indictment has caught both me and my client by surprise,” Andreoff said. “We have not had an opportunity to review the content of the indictment but will do so in the very near future.”

Andreoff stressed that his client is preparing to fight the charges.

“At this point in time, my client has indicated to me that he is innocent of these charges and he wishes to pursue a trial in the matter,” Andreoff said.

As for whether Zajac still has his job with the General Retirement System, Andreoff said: “As of this week, he was still counsel, but I don’t know what may await.”

Officials with the city’s General Retirement System were not readily available for comment. In the past, the system has said it is fully cooperating with the government’s pension fraud investigation.

In November, the Board of Trustees of the Police and Fire Retirement System fired Zajac as general counsel.

When Beasley was indicted in February 2012, his lawyer, Wally Piszatowski, was baffled as to why his client was the only one charged, telling the Free Press: “To me, that’s the most amazing thing — that they would only charge one person.”

But others eventually followed.

Ten months after Beasley’s indictment, Atlanta businessman Roy Dixon was charged with embezzling more than $3 million from three local pension funds. He is accused of using pension funds to build an $8-million mansion and bribing Beasley with cash and a vacation.

Next came Chauncey Mayfield, a former investment adviser to the two City of Detroit pension funds who pleaded guilty last month to conspiring with Beasley to pay him bribes in exchange for new business from the funds. The bribes came in the forms of trips and private jet flights to Las Vegas, Florida and Bermuda.

Mayfield, 56, of Ft. Lauderdale, Fla., faces up to five years in prison and a maximum $250,000 fine.

If convicted, both Zajac and Stewart face up to 20 years in prison and a maximum fine of $250,000.